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Clackamas County department head awarded contracts without competitive bidding

blue heron lagoons.JPG

Although Clackamas County has its own public relations department, Mike Kuenzi preferred to hire outside agencies. In 2011 he awarded a $150,000 contract, with no competitive bidding, for help with the county's purchase of two wastewater lagoons in West Linn.
(The Oregonian/2011)

Auditor Nancy Young was in the midst of reviewing financial records of Clackamas County’s wastewater agency, called Water Environment Services Department, when an anonymous note appeared on her desk:

“There seems to be an overly friendly relationship between CFM Strategic Communications, Inc. (a.k.a. Conklin Fiskum & McCormick, Inc.) and WES’s director. Every year they are given multiple sole-source contracts that over the past few years have exceeded $1,000,000. These contracts are never awarded through a competitive process, are often split into smaller contracts and split between the service districts in order to stay under the Director’s signing authority…”

Young, who leads fraud investigations and forensic accounting for the private regional accounting firm of Moss Adams, followed up and the tip panned out. Young concluded that WES Director Mike Kuenzi improperly handed out four contracts to the public relations firm. She found no fault with CFM.

Kuenzi has not responded to emails and phone calls asking for comment.

Young was particularly suited to examine Kuenzi’s administration of public contracts. She served 10 years as Oregon state audit manager and is an expert in government contract law.

In her December 2011 audit report to county officials, Young pointed out that Kuenzi gave CFM four contracts, totaling $414,000, with no competitive bidding. Furthermore, there was no documentation to justify the exclusive awards, known as sole source contracts. “The contractor does not meet the requirements as a sole-source provider,” Young wrote in her audit.

When asked for required written justification, Kuenzi responded with a cursory explanation. “The contract was awarded as a sole source contract based on the previously developed trust between CFM and the City’s staff and elected officials during the regional partnership discussions.”

The audit became public during an investigation of Kuenzi’s 2012 wrongful discharge of technical services manager Daniel Henninger, who last month won a $322,236 arbitration award. Kuenzi is on paid administrative leave while the county investigates issues raised in the arbitration process.

WES county attorney Chris Storey confronted Kuenzi about the multiple sole-source contracts but never reported his unease with the practice to his superiors.

As a department head, Kuenzi is authorized to award contracts on his own authority up to $150,000. Sole-source county contracts are legal, but only in special circumstances, typically in an emergency or when only one company provides a necessary service or expertise.

State law forbids artificially splitting contracts to stay under the $150,000 threshold.

The months-long arbitration process produced a trove of emails, documents and depositions that show how the contracting process with CFM slowly went awry, resulting in rebukes from both the auditor and arbitrator.

2007: CFM wins its first contract with WES through a competitive bidding process, a $250,000 award to help improve the department’s image after a plan to consolidate sewer districts angered county residents. The county commissioners approve the contract, and Norm Eder, a partner of CFM, becomes a familiar face around county offices.

2008: Kuenzi amends the CFM contract twice, bringing the total to $700,000, approved by the county commissioners.

2009: Kuenzi awards CFM a $50,000 sole-source contract to help develop a second charter for the Regional Wastewater Advisory group that WES formed. He adds $40,000 a few months later.

2011: Kuenzi award CFM a $30,000 sole source contract to track water quality bills in the legislature, followed in July by a $144,000 retainer contract to provide public relations for Clackamas County Service District 1, a special district the county oversees. In August, Kuenzi awards CFM a $150,000 contract, again with no competitive bidding, for work related to purchase of two Blue Heron Paper Co. wastewater lagoons.

Clackamas County WES Director Mike Kuenzi explains billing on public relations contractsClackamas County Water Environment Services Director Mike Kuenzi fired Daniel Henninger in 2012. An arbitrator found he was wrongfully discharged and that Kuenzi fired him in retaliation for bringing up problems with Kuenzi's contracting practices. In a deposition for the hearing, Kuenzi defends an email that acknowledges a contractor billed two separate contracts for work on the same project.

On Dec. 8, 2011, Eder submitted a retainer invoice that Kuenzi worried would appear to be double billing and sent Kuenzi an email: “I need to have this stripped out and resubmitted. If the auditors think that we are charging two separate contracts for the Blue Heron effort I will be sitting in Steve’s office picking up my last paycheck.”

“Steve,” refers to Steve Wheeler, the county administrator and Kuenzi’s boss at the time.

After the audit raised contracting issues, WES scheduled management training and created a checklist for project contracts that requires documenting bids and awards. The auditors did not look into whether Kuenzi was artificially splitting contracts to avoid board review.

Norm Eder and CFM remain on contract with WES to provide public relations for $12,000 a month.